Orders Brisk In August
"Ring-spun is very brisk and has been for a while now," said one spinner. "We began seeing an increase in orders a couple of months ago and it's been steady ever since."
Added another spinner, "Our business has been very positive, particularly with ring-spun yarns. Our business is primarily associated with Central America, and we saw business improve drastically back in June. Fortunately, it's held up pretty well."
While the current run of increased orders is not the first for 2012, several factors separate it from the previous upticks that occurred near the beginning of the year and in April. "Already, what we've seen so far is more sustained than those previous spikes," said one spinner. "There seems to be less fear over the volatility of raw material prices. Customers are not as concerned that they are going to be on the hook for yarn that is priced well above the market value. For a long time, customers shied away from longer programs because they were unsure of what the market would be."
Cotton Prices Stabilizing?
Another spinner said, "I think when customers see current cotton prices, they breathe a sigh of relief. Over the past few months, prices have returned to what they were before the whirlwind in late 2010. They are looking at raw material prices and seeing something they are familiar with. So, there is less hesitancy to place larger orders."
That spinner's observation is backed up by statistics from the U.S. Department of Agriculture (USDA). For the week ended Aug. 17, 2012, quotations for the base quality of cotton in the seven designated markets measured by the USDA averaged 67.98 cents per pound. For the 2009-10 season - the last before the market became so volatile - prices for the year averaged 67.76 cents per pound. In contrast, prices for the 2010-11 season averaged 137.88 cents per pound, with a high on March 7, 2011, of 209.60 cents.
"The return of prices to their pre-2011 levels is, I think, a very positive sign for business, especially if prices level out and don't fall a whole lot more," said one industry observer. "I've said for a long time that what the industry needs is a sustained period of good business, not necessarily great business. What hurts are those periods of very robust business that stretch the ability of the industry to deliver, which are then followed by periods of very slow business that leave companies struggling to cover costs."
Synthetics And Blends Remain Strong
Continuing a trend that began when cotton prices began increasing dramatically several years ago, a number of customers are continuing to replace cotton yarns with blends and synthetics. "In our business, we saw a shift to blends a couple of years ago. A lot of customers who were making 100-percent cotton products shifted to blends. We figured that when cotton prices came back down, these customers would move back to 100-percent cotton. But in a lot of instances, this just hasn't happened. I believe it's because they think that, long-term, synthetic prices will be more stable than cotton, although, in reality, that is not always the case."
Spinners are optimistic that the current spate of orders will continue through most of the year. "To be honest, we are looking at it through a positive lens at the moment. We expect business to continue to be strong for most of the rest of the year. We expect a little bit of a slowdown around the holidays and then for 2013 to begin in a very strong fashion."
August 21, 2012
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